When it comes to getting money for your company, there are times when you may have to go to investors. Investors are generally drawn to an idea, a business model, the team behind the idea, what have you, and they will accordingly invest their money into the company. For startups especially, investor money can be essential when getting things up and running in the way they need to be running.
Investors come in all shapes and sizes and with all sorts of expectations. Some will want a say in the day-to-day goings-on of the business. Others will remain in the background and wait for the return on their investment. And still, others may want to have a hand in picking critical players for your company. As the business owner, you need to determine what level of investor involvement you’re comfortable with. Keep in mind, depending on how much you need the cash and how much money you require. You might not have a lot of choices when it comes to investor involvement. So, before approaching investors for money to infuse into the company, really think it through.
The Truth About Startups…
A few facts about startups that may surprise you. For example, did you know that almost fifty percent of startups will spend at least 400k in the first month to get things going? And this is just the tip of the iceberg.
– Almost 90% of startups will fail
– In 30% of these failures, the reason is that they ran out of funding
– Over eighty percent will struggle with cash flow issues during their first 3 years
– 1 in 3 new businesses start out with less than five thousand dollars
What do all of these facts and figures mean—simply put, very often, an investor or perhaps more than one investor is necessary for you to get the money needed to launch your business correctly.
The key is to have a killer pitch that is guaranteed to win them over and thereby get them to commit their money to your organization. But how do you do this? What techniques and messaging will enable you to entice savvy investors who “know a good thing when they see it”? Below are a few tips and techniques to use when putting together your pitch for potential investors.
Investor Pitch: The Basics
Come Up With Your Elevator Speech
Most have probably heard the phrase “elevator speech,” but what exactly is it, and why is it relevant to you? Essentially, your elevator speech will be a thirty-second pitch that lets someone know what you do and consequently entice them to want to learn more about the company. So, within these thirty seconds, you need to outline your essential product/service, sum up how you help people or what problem it is that you solve, and say something about what makes you so much different from company A or organization B. This may seem like a lot to pack into thirty seconds—and it is. This is why you need to practice this and make sure you’ve got it nailed.
Know Something About the Person You’re Pitching To
When marketing your product or service, you study your audience, design your messaging specifically for them, and determine what channels they frequent to deliver that message. The same goes for your investor pitch. You can’t precisely pitch to someone you know absolutely nothing about. This is why it is vital to research your audience first, a.k.a. the investor.
Some platforms allow you to access information about investors. If they are a public figure, you can take them to google and start digging. The kinds of things you may want to try and find out include: their investing patterns (what types of companies are they apt to invest in). Are they new to the world of investing? What sort of involvement are they likely to want to have? Are they part of an angel network? The more info you can gather, the better focused your pitch will be?
Craft Your Pitch as a Story
Everyone likes a good story—especially investors. You can present all the facts and figures you want, but if it’s not done engagingly, the person will tune out before you even get to the good stuff. Think of the concept of “brand story.” Brands are eager to position their message as a story for a reason—success rates go up exponentially when a compelling brand story is attached to the company. The same goes for an investor pitch. Your success rate will markedly improve if there is a story there.
When crafting this story, think about the following elements: who is the story’s main character—this is likely going to be you and your idea that gave birth to the company. Also, what was the primary dilemma that the protagonist set out to solve; in other words, how did you aim to help people, improve people’s lives, and address their pain points. Putting this together as a narrative will help you hold on to that investor’s attention throughout the meeting.
Map Out Your Succession Plan
If you are a startup, this may seem like a strange piece of the puzzle, but it is necessary. Even if the company is not running yet, you still need a plan for what happens “after you.” For example, the company is likely going to grow. At least you hope it does, and so when you move up in the chain, who will be there to fill roles you previously filled? In terms of growth, there may come a time when you need to fill the CEO role—do you have a plan for this? An investor is going to want to know these things. They will want to see that their money will be safe even when you are no longer directly leading the company.
Pay Attention to How You Present Yourself
And here, we are referring to the basics: in other words, how you dress, your overall appearance. Most have probably heard the saying, “dress for the job you want, not the one you have.” The same can be said for giving investor pitches. You want them to look at you and say, “there’s a person I trust to steer a company toward success.” Without question, first impressions matter. Suppose you want to be the CEO of a company that makes it big one day and is thus attractive to investors, dress for that part.
Understand the Money
When you are pitching to an investor, it really will come down to the money. Bottom line: they want to be assured that your company is poised to make money. What is your revenue model? How will the company make its profit? The investor will want to see how you plan to get customers and entice those customers to keep spending money with your firm, plain and simple. Your investor presentation can have a ton of bells and whistles, but if you don’t address the fact that you need to make money and, by the way, this is how we plan to do that, the investor will be doubtful hand over any funds.
Be Somewhat Picky About the Investors You Approach
Granted, if your startup is desperate for cash, then you may not be able to be too picky. But if you are in a position to wait for that “ideal investor,” it is probably worth doing so. Again, figure out what type of investor involvement you’d be comfortable with. Try and approach investors, when possible, who know something about your industry. Better yet, how about veterans of your industry; in many cases, investors play a mentorship role that can be incredibly valuable to a young company.
First Union Lending Works with Small Companies
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